This archive report was first published on 13 November 2019.
Kenya's start-up scene is thriving, with several agritech companies securing significant venture capital investments in recent months.
Twiga Foods, an agribusiness logistics company, has secured $30 million in a Series B round led by Goldman Sachs, with participation from other VCs. The company plans to expand into the Nigerian market, aiming to tackle high waste rates and lack of effective distribution of agriculture in Africa.
According to CEO Peter Njonjo, the company's goal is to reduce the cost of food for the average African. Food security, a key pillar of the Big Four Agenda, is more about the cost of food than its availability.
However, Twiga Foods faces a central challenge: its dependency on the informal economy. The company sources orders from informal retailers who lack secure cash flow sources, making it difficult for them to secure loans.
As a result, Twiga collects data on retailers to assess their ability to pay back loans. This approach is not unique to Twiga, as many Kenyan start-ups face similar challenges in the informal economy.
Other Nairobi-based start-ups, such as Wefarm and Sendy, are also making waves in the agriculture sector. Wefarm operates a digital network and marketplace for smallholder farmers, while Sendy is an on-demand logistics start-up with expansion plans for the rest of East Africa.
The success of these start-ups follows the footsteps of BitPesa, which recently rebranded as AZA Group. The company provides foreign exchange and distribution outside of the formal banking world and has received $15 million in debt financing from the Development Bank of Southern Africa.
Founded by two American women, AZA Group has recognized the potential of Kenya's business environment, which is characterized by openness, investment, and profit opportunities. President Uhuru Kenyatta's administration has fostered this environment, redirecting government investment towards the Big Four Agenda since 2018.
The shift towards promoting the Big Four Agenda, combined with the recent successes of Kenyan start-ups, is changing the economic landscape for the better. While borrowing for loans is necessary for growth, the ability to service debts is equally important.
